VanGold Mining’s successful 1,039 tonne bulk sample in Mexico provides critical info

Au” = gold. “Ag” = silver. “Au Eq.” = gold equiv.

VanGold Mining’s (TSX-V: VGLD) flagship project, El Pinguico, hosts a high-grade past producing Ag & Au mine (400 tonnes/day). It’s located 7 km south of the city of Guanajuato, in central Mexico. The mine operated from the late 1880s until 1913, mining the El Pinguico & El Carmen veins, thought to be splays of the Veta Madre, the “Mother Vein.” The Mother Vein (“MV“) outcrops for 25 km and remains the most important source of precious metal mineralization in the region.

Management believes the MV may cross its property underneath the high-grade El Pinguico & El Carmen veins, at a predicted depth of 400-600 meters. The MV has been mined to within 250m of the Company’s border. Minimal drilling has been done to date on the Company’s concessions, but no drilling has ever sought to intercept the MV.

VanGold’s main project is within 2-30 km of Endeavour Silver’s El Cubo & Bolanitos mine & mill complexes, Fresnillo PLC’s Las Torres mine & mill, and Great Panther’s Guanajuato complex, four mills that could potentially toll mill VanGold’s ore.

Bulk sample results are good, a substantial de-risking event

On June 2nd, the Company announced the completion of its bulk sample & metallurgical testing programs. Earlier, management had delivered 1,039 tonnes, (of an estimated 175,000-tonne surface stockpile), for processing at Endeavour Silver’s Bolanitos mill located ~28 km to the north. {excellent drone footage here}. Flotation metallurgical tests were performed, creating a high-quality Au / Ag concentrate.

On June 9th, the Company announced results of the bulk sample testing, in which management gained critical insights into metallurgy, metal recoveries, reagent usage and the mineralogy of the ore. This information, and associated cost components, will be studied to assess the potential to direct ship El Pinguico’s surface stockpile, (combined with a similar-sized underground stockpile that’s ~3 times the grade), to one of the nearby mills. 

Average recoveries of gold were 75.2%, (high of 77.7%) & silver at 60.4%, (high of 67.2%). Importantly, a strong concentrate ratio of 232 to 1 was obtained. After removing a small amount of the milled metals for future analysis, the final product consisted of 4.265 tonnes averaging 132 g/t Au, plus 6,661 g/t Ag.

The overall head grade after processing was 1.23 g/t Au Eq. (using a 96 to 1 Au / Ag ratio). The successful bulk sample enabled management to gain a much better understanding of how higher recoveries might be achievable and how to replicate, or possibly improve upon, these results.

Few juniors see data like this ahead of large investments

Arguably more important than the metallurgical metrics is the substantial de-risking of the VanGold story. How many juniors, pre-maiden resource, get to see this kind of data before committing years of time, managerial resources & equity capital? Mission critical info from June, 2020, not from decades ago! Info that helps management in so many operational respects beyond just metallurgy.

Armed with these valuable findings, VanGold can negotiate / communicate with greater confidence & credibility with toll millers (Endeavour Silver, Great Panther & Fresnillo Plc), local community leaders, strategic investors & permitting bodies.

How many otherwise early-stage juniors could become meaningfully cash flow positive within the next year? Once cash flow starts, monetizing the two stockpiles is expected to take 24-30 months. This is a company with a pro forma Enterprise Value {market cap +debt – cash} of just C$7 million [share price C$0.12], (pro forma for ongoing exercises of C$0.10 warrants).

VanGold will not need to raise much additional cash if/when the 24-30 month cash flow period begins, (probably in Q1 2021). Management expects to have at least C$1.5 million in cash at the end of June.

As great as this bulk sample de-risking news is, VanGold is also a compelling exploration story. Hundreds of thousands in cash flow per month, if achieved, would pay for a lot of drilling at El Pinguico. And, there would be plenty left over for exploring the Company’s other targets, and/or making acquisitions.

Total cash flow could be 2x-4x VanGold’s C$7M enterprise value

Until this week’s news, it was hard to estimate how much cash flow might be generated from toll milling the stockpiles. While it remains difficult to know, I put together base & upside cases for toll milling the underground and/or surface stockpiles.

The key metrics in the base and upside case are, assumed Au Eq. price; US$1,600/oz. vs. the US$1,724/oz spot price, recovery rate; 68.0% vs. 72.5%, and lower operating costs in the upside scenario as shown below.

The upside scenario enjoys a modestly higher underground stockpile grade of 4.255 g/t Au Eq. vs. 3.6 g/t Au Eq. (+15%). There’s a chance that the 3.6 g/t base case assumption is too low. In 1959, the Mexican Geological Survey estimated the grade to be 5.6 g/t Au Eq. Plugging in 4.255 g/t Au Eq. reflects this possible upside.

In the two scenarios depicted below, monthly cash flow of between C$500k & C$920k could commence next year and last up to 30 months. Total cash flow from monetizing the stockpiles, assuming that a toll milling contract can be negotiated & signed, is C$15 to C$27 million.

Compare that cash flow potential to VanGold’s pro forma enterprise value of C$7 million. Notice that the upside case’s Au Eq. price assumption is today’s spot price, hardly a stretch.

Next step, regain access to mine…

Clearing debris from the El Pinguico shaft is expected to begin in coming weeks. Once the shaft is safe & clear, VanGold will sample along the bottom of the underground stockpile that contains ~175,000 tonnes grading ~183 g/t Ag & ~1.75 g/t Au (~3.7 g/t Au Eq. near current spot prices). The management team is trying to determine how consistent the grade is throughout the stockpile.

Clearing the shaft will allow inspection of the mine’s #7 Adit (aka the “Sangria” adit), which may provide an inexpensive route to transport underground stockpile material to surface. This is the Company’s preferred method, but fully refurbishing the shaft is another option under consideration.

Once back into the El Pinguico shaft, crews should be able to access the Colmillo Stope, a high-grade portion of the mine prior to its closure in 1913. Examples of historic channel sampling from this area in 1909 can be found on page 5 of VanGold’s corporate presentation. Notice the eight samples of > 10 g/t Au, and five grading 1,000+ g/t Ag among a few hundred samples taken.


Every mining junior on the planet dreams of being in a position to self-fund exploration & development, to avoid massive equity dilution. Very few management teams have the opportunity to make that dream a reality like VanGold does. To be clear, significant risks remain, but the blue-sky potential for this sub C$10 million company is compelling.

As management continues to de-risk the VanGold Mining (TSX-V: VGLD) story, and if gold & silver prices remain elevated or go higher, there’s ample room for the stock price to run. Blessed with a strong technical team & Board, a great project & a tremendous jurisdiction, the best it yet to come.

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